LOT fails to win state aid
By : Robert Wylot
LOT Polish Airlines (LOT) will not be granted an aid package from the government, despite the slump in business following the Sept. 11 terrorist attack on the United States.
Any aid for LOT would only be possible if Poland declared a state of war or emergency, said Bogusław Liberadzki, an MP in the Democratic Left Alliance (SLD) and former transport minister. (Aid subsidies) will be extremely difficult due to the wide budget gap.
Nevertheless, the outgoing cabinet agreed last week to provide LOT with insurance guarantees of up to $1 billion. This, after LOT threatened to suspend all flights after warnings from insurance companies that they will only take over liability for losses of up to $50 million. Before the attack on the United States, insurance firms guaranteed coverage of $2 billion.
But industry analysts are now saying that airlines worldwide need comprehensive cash packages from governments and not just insurance guarantees. The U.S. Congress and President George W. Bush have already adopted a $15 billion rescue package, which includes $5 billion in direct grants and $10 billion in loan guarantees for U.S. airlines.
In the European Union (EU), governments and national carriers are putting pressure on the European Commission to allow state aid (prohibited by EU competition regulations) on a non-discriminatory basis for each airline. The Commission said on Sept. 23 that it may agree to a conditional aid package if it finds the aid to U.S. carriers infringes on competition in Europe.
I think European carriers will receive aid from governments because the airline industry is a very political issue and its a matter of prestige for governments, said Britta Simon, airline analyst at Bank Sarasin in Zurich.
Despite this international backdrop, neither the outgoing cabinet, nor the SLD, are ready to inject the troubled Polish airline with money.
If our calculations indicate that we cannot handle the situation on our own, then we will ask the government for help, said Leszek Chorzewski, LOTs spokesman. But considering the current problems of the state budget, politicians will just pat us on the back and that will be all.
The government was initially reluctant to provide LOT with insurance guarantees, before Prime Minister Jerzy Buzek assured the airline that premiums would be covered by the state.
If Buzek hadnt intervened personally, then the attitude of the governments officials would have pushed LOT to bankruptcy, Chorzewski said.
Other politicians, however, were equally downcast about helping LOT overcome its financial constraints.
Janusz Lewandowski, an MP with Civic Platform (PO) and former privatization minister, said normally the government would help LOT because the carriers problems are the result of external issues. But in the current budget climate, the government has to save rather than spend, Lewandowski said. He said along with LOT, pressure is also on the government to subsidize steelworks, coalmines and pensioners.
Its the most unfortunate combination of circumstances you could imagine for LOT, Lewandowski said. First, its strategic investor, Swissair, is in trouble; second, the Polish state has to cope with an enormous budget gap; and now LOT is hit by these recent events.
Analysts agreed that if the government fails to bail out LOT, the states airline will suffer.
If LOT receives no aid from the Polish government it will be at a disadvantage against other carriers, Bank Sarasins Simon said.
